Adventures in Legal Outsourcing to India and Beyond

August 2008

August 30, 2008

I don't knowwhere it's coming from. Could be business schools, BPOs, corporate self-improvement books, or IT drones lacking in basic communication skills,
for all I know. In any case, it seems to be spreading over some parts of the legal outsourcing industry like margarine on toast. Unlike butter
substitutes, however, it's not healthy. I'm talking about the kind of
corporate, Orwellian, newspeak or doublespeak that allows spokespersons
and their companies to sound vaguely like they are saying something
intelligent, while either saying nothing, or saying multiple things,
each contradictory to the other, and usually accompanied by useless
powerpoint graphics to distract attention from the fact that nothing of
any actual value is being communicated. Here's an example, from my
admittedly shaky memory of a speech at a conference, by an exemplar of
"thought leadership" (another of those unnecessary and mystifying terms
that I really wish would disappear):

The
drivers in our space, regardless of their verticals, are seeking
end-to-end delivery capability, and in particular, what [blah-blah-blah
company] provides, namely, seamless integration of LPO domain deliverables
in real time. Through a combination of experiential interoperability
on all platforms, multi-tiered process architecture, requirements
traceability, process-mandated artifacts, context-dependent
repositories, robust process-orientation, issue escalation, and clear
project ownership, we are able to deliver best-of-breed, seamless
knowledge management across geographical, time and project boundaries,
and throughout the document lifecycle, to help our clients derive value
from internal knowledge assets previously encapsulated in unstructured
data trapped in islands unreachable by process execution. Our domain
expertise and skill sets satisfy not only the need for convergence of
quadrant quality across processes, interfaces, and outputs, but also
the increasing market fragmentation, in which clients otherwise seek to
leverage application and legal process lifecycle activities through
identification, prioritization and execution by multiple vendors, each
using their own indigenous tools and benchmarked process performance.

I
have just one question. At what point in a "document lifecycle" does
life begin? Or in other words, is there some point where if you delete
a document or toss it in the trash, you are having an abortion, or is
it murder? Just wondering.

August 29, 2008

13 days after Acumen Legal Services filed its motion to dismiss the lawsuit against legal process outsourcing to India, filed by a Maryland law firm in the Washington D.C. federal court, the plaintiff law firm, rather than respond to Acumen's motion, has withdrawn its case. Confronted with the motion to dismiss, which was drafted by a team of Indian lawyers at SDD Global Solutions in Mysore (with further assistance from the team at Acumen Legal Services), the plaintiff U.S. law firm requested consent to further amend its complaint and expand the case into a class action on behalf of multiple U.S. law firms. The day after that consent was refused, the plaintiff withdrew the lawsuit, asserting that the plaintiff firm was being dissolved.

UPDATE:

Joseph Hennessey, the lead
lawyer in the case, has
posted a comment on this blog, announcing the preparation of a new lawsuit. Hennessey now says he's busy hunting
for "those who have been victimized by the use of foreign legal process
outsourcers," so he can file "an action for damages on a class wide
basis." But judging from the first
"example" he says he's found, where Indian doctors allegedly were
used to assist in a surgery that "went horribly wrong," it looks like he still has more plaintiff-searching to do. If anybody can see a
connection between this allegedly botched surgery and legal outsourcing, please
let us know!

No one seriously
expected the American Bar Association to come out against the
legal services outsourcing to India, or as many call it, "legal process outsourcing"
or "LPO." After all, the ABA historically has been a finger-in-the-wind
organization. Today the wind blows against exorbitant legal fees and
law firm inefficiencies that for too long have been a burden on the
economies and even ordinary citizens of the West. It blows in the
direction of globalization -- of legal services without borders.
Ethics panels from New York City, Los Angeles County, San Diego, Florida, and North
Carolina already have stated what should be obvious, which is that
there is nothing necessarily unethical about having legal work done by
lawyers or non-lawyers at off-shore providers, so long as the work is
carefully supervised and edited by attorneys admitted to the bar in the
U.S. jurisdiction where the work is being delivered.

So what is surprising about the recent ABA Formal Ethics Opinion 08-451 is not that the ABA Standing Committee on Ethics and Professional Responsibility fell in line with the other panels. The surprise is that the ABA Committee
came right out and "saluted" the outsourcing of legal services: "The
outsourcing trend is a salutary one for our globalized economy." In
the Opinion, the ABA Committee went on to mention that "outsourcing
affords lawyers the ability to reduce their costs and often the costs
to the client," allowing law firms to better represent clients
"effectively and efficiently." In the words of the Committee, which
apply to in-house counsel as well as law firms: "There is nothing
unethical about a lawyer outsourcing legal and non-legal services,
provided the outsourcing lawyer renders legal services to the client
with the 'legal knowledge, skill, thoroughness and preparation
reasonably necessary for the representation.'" (Quoting Model Rule
1.1.)

Regarding the ethical requirements imposed on in-house
or outside counsel sending legal work overseas, the ABA Committee
offers the following guideline: "At a minimum, a lawyer outsourcing
services... should consider conducting reference checks and
investigating the background of the lawyer or nonlawyer providing the
services, as well as any non-lawyer intermediary involved." I already
can hear the cries of the anti-outsourcing Luddites, who will point out that the ABA is not even requiring background checks -- only that outsourcers "consider"
conducting them. It is true that there are hardly any outright
prohibitions or mandatory proscriptions in Opinion 8-451, and certainly
no new ones (and the ABA does not have authority to issue binding rules
anyway, since that is left to the various state bar panels), but there
is plenty of advice.

For example, the ABA Committee suggests that "in some instances, it may be prudent
to pay a personal visit to the intermediary's facility, regardless of
its location or the difficulty of travel, to get a first-hand sense of
its operation...." (emphasis added). I agree. By all means come to
India, and especially Mysore! The people and culture are wonderful;
the weather and natural beauty are amazing; and there are few things
more exciting than taking a front-row seat to watch, or better yet, to
participate in, a world in transition. First-rate legal outsourcing
companies can only benefit from on-site visits by prospective clients.
Law firms and corporations interested in legal outsourcing can learn
first-hand that the professionalism, enthusiasm, and efficiency of
Indian lawyers at such providers compare favorably with any law firm in
the West. Prospective clients also can learn that at the best Indian
legal off-shoring companies, the work is carefully supervised by
Western-licensed attorneys, who also train the Indian lawyers in the
applicable law and practice.

The ABA Committee further
recommends that "when engaging lawyers trained in a foreign country,
the outsourcing lawyer should first assess whether the system of legal
education... is comparable to that of the United States." In a previous
article
for LexisNexis, I commented on how U.S. law schools, just like Indian
ones, do not teach students how to practice law. I discussed how the
legal training provided by at least one Indian legal outsourcing
company (mine!) is superior in many ways to the training provided in
the West. But even if the foreign training falls short, the ABA does
not prohibit outsourcing. The Committee states that "the lack of
rigorous training or effective lawyer discipline does not mean that
individuals from that nation cannot be engaged to work on a particular
project. What it does mean... is that it will be more important than
ever for the outsourcing lawyer to scrutinize the work of the foreign
lawyers...."

In the Opinion, the panel further states that in
some circumstances, it "may" be necessary (a) to advise the client that
an outsourcing provider is being employed, and (b) "perhaps to obtain
the client's informed consent...." In these times, when virtually all
major corporations are already present in India, and when many
forward-looking corporations are insisting that their outside law firms
send legal work offshore, this advice should not be hard to follow. I
was speaking not long ago with a partner at one of the largest U.S. law
firms, who told me that before being allowed to pitch for business at
some of America's biggest companies, his firm was required to fill out
a questionnaire. The form included the question: "What are your
capabilities in the area of outsourcing legal work to India?" Modern
clients are not afraid to hear about legal services off-shoring -- they
are demanding it.

Regarding data security and confidentiality,
the ABA Committee recommends non-disclosure agreements and conflict
checks. This is a no-brainer, and it should be implemented with U.S.
law firms as well, even where no legal outsourcing abroad is involved.
Interestingly, despite the loudly publicized, anti-outsourcing lawsuit
by a Maryland law firm, alleging all kinds of dangers to
confidentiality, based on speculation that U.S. government spies are
seizing and poring over all of the zillions of pages of mostly boring
data being sent to legal services vendors in India, (see the motion to dismiss),
the ABA Opinion contains no mention of this allegedly grave threat.
Instead, the Committee urges outsourcers to "consider" whether
documents "may be susceptible to seizure in judicial or administrative
proceedings" in a foreign country. I have not thoroughly researched
this, but none of the many lawyers I know in India are aware of
anything the democratic government in that country is doing, or is
allowed to do, that is more intrusive or violative of privacy than what
the Bush administration already is doing in the United States.

On
the subject of fees, the panel repeats the usual requirement that the
charges to the client must be "reasonable," and it notes that if the
outsourced work is billed to the client as an out-of-pocket expense of
the law firm, "no mark-up is permitted," beyond "a reasonable
allocation of associated overhead" or "the cost of supervising those
services," unless there is "an agreement with the client authorizing a
greater charge." According to the ABA Committee, none of this requires
the outsourcing law firm to bill for the work in India as a separate
disbursement, or "to inform the client how much the firm is paying," so
long as the legal fees charged by the law firm are not "unreasonable."
In other words, the loopholes are large enough for even the largest of
law firms to drive through with an eighteen-wheel truck loaded with
legal fees.

Lastly, the Opinion includes the obligatory warning
against "the unauthorized practice of law," while making sure to point
out that "this Committee lacks the authority to express an opinion" as
to what that is. This topic is of course a minefield, given that
thousands of U.S. law firms, big and small, use paralegals, summer
associates, interns, newly-minted associates, and others not admitted
to any bar, to perform all sorts of legal services, ranging from legal
research, to legal drafting, to document review and coding. If
utilizing excellent, U.S.-law trained, Indian lawyers to do this work
were held to be "the unauthorized practice of law," then by analogy,
nearly the entire U.S. legal world would be in trouble.

In
short, the ABA panel, far from standing in the way of legal
off-shoring, has embraced it, with mostly common sense caveats that are
no impediment to this growing trend.

To see a copy of the ABA press release and summary of the Opinion, as well as a link to the full Opinion itself, click here.

August 23, 2008

And though the news was rather blah,
Well, I just had to laugh;
I knew the world was flat.

People blew their minds out with the
shock;
They didn't notice that the times had changed.
A crowd of others stood and sighed;
They'd seen this thing before;
Nobody was really sure why everybody wasn’t bored.

It’s amusing to watch all the hullabaloo about mega-law-firm
Eversheds announcing that at some point, it will outsource some of its “small
commercial contracts” work to India. It shows how even after several major media
and trade articles on the subject of legal off-shoring, much of the law world remains remarkably unaware of what's going on.

It reminds me of a moment in October, 2006, when The New York Times reported, as if it
were shocking, that mega-law-firm Clifford Chance was sending secretarial and
bookkeeping work to a center near Delhi. I had to laugh.By 2006, nearly every major company in the
world had been using routine business process outsourcing (BPO) in India for years.More funny was the fact that the article
(“Law Firms Start to Adopt Outsourcing,” October 27, 2006) made no mention of the
outsourcing of legal services.This was
despite the fact that other law firms and companies already had been sending
not only secretarial work, but legal work, to India for so long that an Indian legal outsourcing industry had emerged.By the date of the article, Pangea3 had been growing for two years, and
Atlas Legal Research had been around for about five, not to mention 20 or more other legal
outsourcing companies in India at the time.

Since then, Clifford Chance reportedly has created a team of seven
Indian paralegals and six Indian law graduates to add to the ranks of its India personnel at
Integreon.A couple of thousand or more Indian attorneys (7500 if you believe the research analysts) are performing Western "legal process outsourcing " (LPO) and other legal services at a host of
other vendors. Exactly a year ago, the giant U.S. law firms Jones Day and Kirkland & Ellis went public with the fact that they were handling the outsourcing of legal work to India at the insistence of their clients.

And now, some in the legal media world, especially its blogosphere, are
all aflutter, because of a report that Eversheds “has signed a contract with a
third-party [Indian] provider to outsource small commercial contracts that are
too expensive to carry out in the U.K. or in-house.” Well, please excuse me if I’m underwhelmed.

But putting unwarranted feelings of "industry insider" superiority
aside, I’m happy to see this happen, and I wholeheartedly agree with much of
what Eversheds is saying to the press.For example, its commercial group head, Jonathan Guest, is quoted as
saying: “Clients like the concept [of outsourcing work] but want someone to
establish the process and provide verification. From our perspective we are bringing a
solution to a perceived client need - we will hopefully be introduced to new
clients through this and it will lead the way for the firm to act for them on
larger scale work.”

We’ve seen this happen over and over again at SDD Global Solutions, where corporate and
law firm clients alike, who otherwise never would have plunged into legal
outsourcing, are doing so because our managing U.S. law firm, SmithDehn LLP, is
supervising the operation.What’s more,
this is leading to further work, for both the law firm and the outsourcing
company.

After one of the major Hollywood studios entrusted both firms with legal
research and drafting on a film project last year, the studio's parent company recently
came to SmithDehn with a request to increase the scope of the work. In-house counsel wanted help with a series of
multi-million-dollar deals involving the online licensing of a vast portfolio
of film and television content to all of the major internet providers.When we performed our ethical obligation by
telling him that we envisioned some of the work being handled by outstanding, U.S.
law-trained Indian attorneys, he said the following: "Not only do we approve the
involvement of SDD Global, we're insisting on it!" He said it was
precisely because the project was so "important" that the company
wanted to involve our India
legal outsourcing affiliate. The company wanted "no stone unturned" on
this assignment, and it knew from experience that “big firm” outside attorneys
would charge exorbitant fees and would not deliver a superior result. (An interesting rebuttal to those who say legal outsourcing is okay for relatively inconsequential projects, but never for "bet-the-company" or other major matters.)

The above
was one of several situations where our law firm has gotten business that it
would not otherwise have received, thanks to legal outsourcing to India. In fact, we’ve seen legal work that would not
even exist at all, for any law firm, if not for legal services off-shoring.

For example, SDD Global in India is handling nearly all of the litigation
work for the defense in a high-profile media libel case in California, with supervision
by SmithDehn and local counsel.Without
legal outsourcing to India,
battling this lawsuit would not have made economic
sense.As so often happens, the
defendants would have simply paid the plaintiff to go away. This would have
been just to avoid usual U.S.
legal fees, even though the case has no merit.But with an Indian team doing most of the work, it is less expensive
for our client to fight the suit, than to settle it.

The implications of this case may be significant. If and when it is dismissed on summary
judgment, the lesson heard far and wide will be that frivolous lawsuits can be
defeated on the merits, instead of settled simply out of fear of legal fees.And as a result, more work will be created for U.S. lawyers,
not less.

As the Eversheds partner reportedly said, regarding the
contract work it plans to send to India: “the outsourcing scheme will
actually ­create work that would otherwise not be done…. It’s not taking work
away from anyone…. It’s actually creating work out of contracts that would ­otherwise
sit in a metaphorical drawer.”

So much for the tired myth that legal off-shoring is
necessarily bad for Western lawyers. For
Western law firms that appreciate its benefits, outsourcing to India can be a
ticket to survival and growth.

In a legal case
apparently designed by a
U.S. law firm to place roadblocks in the way of the fast-growing legal services
outsourcing industry in India,
the Indian lawyers are fighting back.

Newman
McIntosh & Hennessy (“NMH”), a U.S.
law firm worried about off-shoring of legal work, sued India-based Acumen Legal
Services, along with U.S. President George Bush, in the Washington D.C. federal court. NMH is suing on the basis of
speculation, unsupported by even a single example, that the government is intercepting all or most of
the data sent by U.S.
lawyers to foreign legal outsourcing providers, as part of an anti-terrorism
campaign.Seizing on that speculation as
an excuse, NMH seeks a court order against “all United States-based attorneys”
who outsource legal work to India and "all foreign legal outsourcing providers."

Thanks to a motion to
dismiss and supporting legal brief drafted entirely in Mysore, India,
the NMH law firm is getting an unexpected taste of the kind of high-quality
legal work that Indian lawyers can provide, even in the Washington D.C. federal
court.In their brief on the motion to
dismiss, the legal team for Acumen points out the following:

NMH’s requested declaratory and injunctive relief, in
addition to having no legal or factual justification, would reach far beyond
NMH’s obviously intended target, namely, low-cost foreign legal outsourcing
companies, which NMH apparently perceives as competition. The requested relief could have a substantial
adverse effect on the operations of all
law firms that have foreign offices, and all U.S. corporations that need to use foreign counsel to transact business abroad.NMH’s requested ruling that any foreign electronic transmission of data
between clients and attorneys, or between attorneys, constitutes a waiver of
constitutional rights and discovery privileges, would amount to an untenable
and unwarranted interference with global commerce.

Moreover, NMH’s request for an order requiring all
attorneys in the United States, including in-house counsel, (a) to search for
every instance in which they ever transmitted any kind of data to any foreign
national, and (b) to send a notification regarding the same in every case,
presumably to the owner of the data, would amount to one of the most onerous
and unjustified burdens ever imposed by any court in a civil proceeding.

In addition, by requesting the Court to issue
declarations answering seven hypothetical legal questions, purportedly because
the NMH law firm “need[s] guidance,” wants “to gain certainty,” and “must
understand” various points of law to help the firm “in an increasingly
globalized legal services environment,” NMH seeks relief that is impermissible
under well-established principles governing declaratory judgments.The NMH lawyers, in essence, are seeking to
outsource their legal research tasks to this Court, and secondarily to Acumen,
President Bush and their respective counsel.

NMH’s Complaint is extraordinary, not only for what
it contains, but even more so for what it does not.Nowhere in the Complaint does NMH allege:

any example of
an actual or impending injury to itself or to anyone;

any actual or
impending violation of Fourth Amendment rights;

any instance of
an actual or impending waiver of Fourth Amendment rights;

any basis for
finding a waiver of Fourth Amendment rights, given that NMH does not allege
that any Fourth Amendment rights are being violated by the supposed government
interception of data;

any instance of
an actual or impending breach or waiver of attorney-client privilege or
confidentiality;

any actual or
impending example of government interception of data;

any actual or
impending instance of transmission of data to any foreign nationals by anyone;

any basis for
NMH’s speculation that electronic transmissions to foreign nationals are more
likely to fall into the hands of the government than are domestic
transmissions, which are subject to possible domestic surveillance by law
enforcement agencies;

any examples of
actual or impending conduct within the District of Columbia by any of the parties;

any relationship
or interaction of any kind among any identified persons or entities in the District of Columbia or anywhere else;

any monetary
dispute or requested monetary relief that could support the “amount in
controversy” requirement for NMH’s assertion of diversity jurisdiction;

any legal or
factual basis upon which this court could grant the sweeping declaratory and
injunctive relief sought against millions of non-parties, such as every lawyer
in the United States, and every foreign legal outsourcing company;

any reason why
NMH cannot avoid the speculative dangers it alleges by simply (a) continuing to
refrain from using foreign legal outsourcing providers, and (b) seeking a
protective order in any litigation where NMH believes that its clients’ data
may be sent by adversaries to such providers;

any legal or
factual basis upon which the court could require the Executive Branch to
“prevent the waiver of Fourth Amendment rights” or “safeguard the
attorney-client privilege and client communications and client confidences and
secrets;” or

SDD Global was hired to work on the defense, and I'm very impressed with the team of Indian lawyers and paralegals who researched and drafted the motion. In fact, the product was so good that the local D.C. attorney, a former partner at Bingham and veteran of Morgan Lewis & Bockius and Skadden Arps, and a Harlan Fiske Stone Scholar at Columbia Law School (which means he is smarter than me, since I did not win that award when I was at Columbia, maybe because I was too busy wasting time in New York nightclubs) did not see a need to make any significant changes before filing.